What's the Scoop on Variable Rate Mortgages?

Here is some data on variable rate mortgages:

• Excess demand in the economy is surprisingly persistent despite increased interest rates.

• The labour market is still tight and new immigration to Canada is at an all-time high.

• Inflation rate has come down in Canada after reaching a 30 year high of 8.1% in June 2022.

• Annualized inflation over the past 10 months is 3.9%. This suggests reaching the target of 2% will be a slow run.

• The BoC Prime rate has risen from 2.45% in March 2022 to the current 7.20%. This impacts our variable rate mortgage holders.

• 7.20% is the highest it’s been in 22 years. Meanwhile, sales and home prices in Canada have accelerated.

The big question – if you have a variable rate mortgage do you lock in, or ride it out?

Some people think they missed the boat if they have not already locked in. Others are feeling bearish and opting for a 3-5 year fixed rate to wait out the uncertainty. A mortgage check-up is always recommended when you are uncertain. Our advice is not one size fits all. It truly depends on if you have the financial means to wait out the higher rates of a variable mortgage and withstand the uncertain and higher mortgage payments. If you are of the mindset that it will take 3 years or more for rates to correct, and if you can obtain a fixed rate lower then your present variable terms, then it could be worth exploring a lock-in.